MARKET WATCH: NYMEX, Brent crude oil prices settle below $30/bbl

US light, sweet crude oil prices for February delivery dropped to settle under $30/bbl on the New York market Jan. 15, and the Brent contract for March delivery settled at under $29/bbl on the London market.

Ole Hansen, head of commodity strategy at Saxo Bank, said the drop in crude oil prices on world markets came as sanctions against Iran were lifted, enabling Iran to resume exporting oil to an already oversupplied market.

“Once the dust settles, and oil has made its initial reaction, the next question will be how soon the Iranians can or will increase supply,” Hansen said. About 24 supertankers could depart Iran soon with oil from storage, he said.

“This initial flood of oil is what the market should worry most about in the very short term,” Hansen said. For what he calls the medium term, Hansen expects gradual increased oil production from Iran.

Hansen noted Brent crude oil has lost nearly 25% of its value so far in January and 38% since the Dec. 4 meeting of the Organization of Petroleum Exporting Countries.

Elsewhere, China’s authorities have decided to impose more curbs on speculative moves on the yuan to bring an end to a “mini-devaluation of the Chinese currency since the start of the year,” Saxo Bank analyst Lakshmi Thurai in Singapore said.

The move initially appeared to reassure stability for China’s stock markets, Saxo Bank analysts said.

Barclays said there is evidence emerging of growing weakness in some key components of Chinese commodity demand. November 2015 statistics showed the first negative year-on-year crude oil demand figure since June 2014, said Kevin Norrish of Barclays in London.

Energy prices

The February crude oil contract on the New York Mercantile Exchange declined $1.78 to settle at $29.42/bbl. The March contract was down $1.72 to settle at $30.39/bbl.

The NYMEX natural gas contract for February dropped nearly 4¢ to a rounded $2.10/MMbtu. The Henry Hub gas price held at $2.19/MMbtu on Jan. 15, unchanged from Jan. 14.

Heating oil for February delivery dropped 4.6¢ to 93¢/gal. The price for reformulated gasoline stock for oxygenates blending for February was down 4.7¢ to a rounded $1.02/gal.

The February ICE contract for Brent crude dropped $1.94 to $28.94/bbl, and the March contract was down $2.03 to $29.69/bbl. The ICE gas oil contract was $278.75/tonne on Jan. 15, down $4.50.

The average price for OPEC’s basket of 12 benchmark crudes for Jan. 15 was $24.74/bbl, down 26¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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